Impact of Tariffs on Economy

The video tutorial explores tariffs as a form of protectionism, explaining how they distort markets previously operating under free trade. It uses a tariff diagram to illustrate the impact on supply, demand, and imports. The tutorial also discusses the revenue generated for governments and the deadweight losses in consumer surplus and world efficiency. Arguments for tariffs, such as protecting infant industries and preventing dumping, are analyzed, highlighting their potential benefits and drawbacks.

What is the primary purpose of tariffs in the context of protectionism?

• To encourage foreign investment

• To increase exports

• To protect domestic industries

• To lower domestic prices

In a free trade scenario, why do world suppliers have a comparative advantage?

• They face higher tariffs

• They have limited resources

• They can supply at a lower price

• They have higher production costs

What happens to the supply curve when a tariff is imposed?

• It remains unchanged

• It shifts upwards

• It becomes vertical

• It shifts downwards

How does a tariff affect domestic supply and demand?

• Domestic supply increases, demand decreases

• Both supply and demand decrease

• Domestic supply decreases, demand increases

• Both supply and demand increase

What does the green box in the tariff diagram represent?

• Government revenue

• Domestic employment

• World efficiency loss

• Consumer surplus

What is a deadweight loss in the context of tariffs?

• A gain in world supply

• A loss of government revenue

• A loss of consumer surplus and world efficiency

• An increase in domestic employment

How can tariffs protect infant industries?

• By lowering production costs

• By allowing them to grow and gain economies of scale

• By increasing foreign competition

• By reducing domestic supply

What is one argument for using tariffs to protect against dumping?

• To increase foreign imports

• To lower domestic prices

• To reduce government revenue

• To raise the price of imports

How might tariffs improve a country's current account position?

• By decreasing domestic production

• By increasing import expenditure

• By reducing import expenditure

• By increasing export tariffs

What is a potential benefit of tariffs on domestic employment?

• Reduction in government revenue

• Protection of domestic jobs

• Increase in foreign labor

• Decrease in domestic jobs